M/s Fugro Geoteam As vs. The Additional Director Of Income Tax

Facts

M/s Fugro Geoteam AS, a Norwegian company engaged in acquiring 3D seismic data for Reliance Industries Ltd. and ONGC, filed its return for AY 2008-2009 declaring income of ₹18,27,42,870/- under Section 44BB of the Income-Tax Act, 1961. The Assessing Officer rejected the claim for taxation under Section 44BB and taxed the income as fees for technical services. The Dispute Resolution Panel affirmed the assessee's view. The Income Tax Appellate Tribunal did not accept the appellant's contentions, leading to the present appeal before the High Court. The dispute involves the inclusion of mobilization/demobilization fees received outside India in the computation of income under Section 44BB.

Held

The High Court held that Section 44BB provides a special scheme for taxation of non-residents engaged in specific activities related to mineral oil exploration. The provision clearly states in sub-section (2) that amounts paid or payable (whether in or out of India) and amounts received or deemed to be received in India on account of services rendered or plant and machinery supplied in connection with mineral oil operations outside India are to be included for calculating the aggregate amount under Section 44BB. The Court found no merit in the appellant's contention that Section 5(2) would prevent the inclusion of income received outside India, as Section 44BB is a special provision designed to simplify the computation for such non-residents. The Court noted that the appellant had not invoked the benefit of sub-section (3) of Section 44BB, which allows for claiming lower profits by maintaining books of account. Therefore, the mobilization advance received outside India was rightly included for calculating income under Section 44BB. The questions were answered against the appellant.

Key Issues

1. Whether, on the facts and in the circumstances, the Tribunal erred in law by not correctly interpreting Section 44BB of the Act? (Question of law) 2. Whether, on the facts and in the circumstances and in law, the Tribunal erred in holding that the mobilization/demobilization fee of ₹28,21,23,166/- received by the appellant for services rendered/vessel operated outside India should be included in calculating the aggregate amount under Section 44BB(2) of the Act? (Question of mixed law and fact) 3. Whether, on the facts and in the circumstances and in law, the findings of the Tribunal can be considered perverse? (Question of law) Assessee's Contentions: The assessee argued that Section 44BB is a computation section and cannot override the charging sections, specifically Section 5(2) of the Act, which states that tax is levied with reference to receipt or accrual within India for non-residents. The mobilization advance received outside India should not be subject to tax under Section 44BB as it is not received or accrued in India. The non-obstante clause in Section 44BB(1) does not encompass Sections 4 and 5. Revenue's Contentions: The revenue contended that the questions of law are answered by the High Court's decision in Sedco Forex International Inc. versus Commissioner of Income Tax (2008) 299 ITR 238 (Uttarakhand). The revenue further submitted that the questions are answered and allowed the appellant to argue on merits.